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Glossary of loan-based finance terms

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Technical words and phrases used to describe social investment. Copywright CAF Venturesome


Money is just one form of capital – other forms include (but are not limited to) property, equipment, human resources and intellectual property. Whatever the form of capital, the term refers to the potential value of assets rather than accumulated assets themselves.

Civil society organisation

This term applies to the range of organisations that may be eligible for social investment. This includes grant-funded/fundraising charities through to social-purpose businesses that operate to generate a significant proportion of profits for charitable spend.


Is a borrower’s pledge of specific property to a lender to secure repayment of a loan. The collateral serves as protection for a lender against a borrower’s default.

Development capital

Enables organisations to invest in order to build capacity. ‘Hard’ development capital refers to investment in property or other tangible assets. ‘Soft’ development capital describes investment in products, services or people e.g. additional staff ahead of earned income.


Is the share capital of a firm representing the value of ownership interest.

Equity subscriptions

Subscribing to shares in a company. Each share represents ownership of a proportion of the total value of the company.

’First loss’ tranche

A segment of an investment fund that stands ready to absorb any losses up to a pre-agreed maximum. Also known as “loan loss layer”.


This is a conditional or unconditional gift of money with no expectation of a financial return (i.e. an expected financial return of “– 100 %”)

Impact Investment

See Social investment


A sum of money which is borrowed and has to be paid back, usually with interest.


This is an extension of credit from a lender when a borrower’s account reaches zero (i.e. when more money is withdrawn from a bank account than is actually available).

Patient capital

Loans offered on a long-term basis (typically 5 years or longer) and on soft terms (e.g. capital/interest repayment holidays and at zero or sub-market interest rates).


The funder takes a financial stake in an organisation in return for providing the capital for the development of a particular initiative. The return the funder receives is linked to the financial success of the venture (usually via a royalty payment).

Restricted funds

Finance that can only be used for specific projects and cannot be used to cross-fund programmes, even temporarily. Such funds are usually in the form of grants.

Secured loan

A loan that is collateralised against a tangible asset e.g. building, equipment and land.

Social enterprise

An organisation that generates income to achieve social and/or environmental impact. Social enterprises can be structured as a for-profit or non-profit. Registered charities can also be social enterprises.

Social investment

The use of money to achieve both a social and a financial return.

Standby facility

This is a commitment by a lender to advance a specified amount of funds for a period of time (i.e. a line of credit) for a particular project, which may be drawn down only if budgeted income does not materialise.

Tangible asset

A resource that has a physical form e.g. buildings, equipment, vehicles etc.


An undertaking to provide financing if other sources fail.

Unrestricted funds

This is finance that can be used exactly where the organisation needs it to further its objectives. The funds can be in the form of grants, loans, reserves, equity etc.

Unsecured loan

A loan that is not collateralised against tangible assets.

Working capital

Working capital is the funding required to manage the timing differences of income and expenditure. ‘Open’ working capital tides an organisation over before it has raised all the money it needs to meet its costs. ‘Closed’ working capital tides an organisation over before committed funding is paid, by means of a bridging loan or an overdraft.

Page last edited Oct 22, 2015

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